Christmas tax deductions: gifts, bonuses and the work party
Christmas is a good time to thank your team and clients, but the tax rules for festive spending aren’t always intuitive. A bottle of wine and a bunch of flowers can be taxed quite differently, and gift cards for staff now come with a choice to make.
Here’s a quick guide to Christmas tax deductions for the most common festive expenses this year, so you can plan your spending before the season gets busy.
Christmas tax deductions at a glance
Expense | Income tax deduction | FBT or PAYE |
|---|---|---|
Food and drink gifts to clients (wine, chocolates, food hampers) | 50% | Not applicable |
Other client gifts (flowers, books, branded items) | 100% | Not applicable |
Food and drink gifts to staff | 50% | No FBT |
Other staff gifts | 100% | FBT, unless within the thresholds |
Staff gift cards | 100% | Your choice of FBT or PAYE |
Cash bonuses | 100% | PAYE, plus KiwiSaver and student loan deductions |
Christmas party | 50% | No FBT |
Where only 50% of an expense is deductible, a matching GST adjustment is also needed.
Gifts for clients
The key question is whether the gift is food or drink. Wine, chocolates and Christmas hampers fall under the entertainment rules, so only 50% of the cost is deductible. Non-food gifts, such as flowers, books or branded merchandise, are generally fully deductible.
Gift cards depend on what they can be spent on. A card that can only be used for food, drink or entertainment is likely to be treated as entertainment. A general-purpose card is more likely to be fully deductible.
If you’re choosing between a hamper and a non-food gift of similar value, the non-food gift costs your business less after tax.
Gifts and bonuses for your team
Food and drink gifts
A food hamper or a bottle of wine for each staff member is treated as entertainment. It’s 50% deductible, and fringe benefit tax (FBT) doesn’t apply.
Other gifts
Non-food gifts, including non-food hampers such as beauty or car care packs, are fully deductible but count as fringe benefits. No FBT is payable as long as you stay within both of Inland Revenue’s limits:
Per employee: $300 a quarter if you file FBT quarterly, or $1,200 a year if you file annually.
For the whole business: $22,500 a year across all employees.
The limits are cumulative, so birthday gifts and other perks earlier in the year count too. If you go over either limit, FBT is payable on the full amount, not just the excess. See Inland Revenue’s guidance on unclassified benefits and gift cards.
Gift cards and vouchers
For gift cards given to staff since 16 April 2025, you can choose to treat them either as a fringe benefit under the FBT rules or as income through payroll.
The FBT route is often simpler and may mean no tax to pay if you stay within the limits above. But it comes with a catch: you must still file an FBT return, even if it’s a nil return. If you’d rather not register for FBT, the card goes through payroll like a bonus. Our article on recent FBT changes explains the options in more detail.
Cash bonuses
A cash bonus is income, so it goes through payroll with PAYE deducted. Remember that KiwiSaver and student loan deductions apply too, along with your employer KiwiSaver contribution, so budget for the full cost rather than just the bonus itself.
If an employee is entitled to the bonus under their employment agreement, it may also need to be included in holiday pay calculations. A genuinely discretionary bonus generally isn’t.
The Christmas party
A Christmas party is entertainment, whether it’s drinks in the office, a meal at a restaurant or an afternoon out with the team. Food, drink and the associated costs are 50% deductible, with a GST adjustment for the other half. The good news is that FBT doesn’t apply.
Don’t confuse the party with everyday refreshments. Morning and afternoon tea for staff remain fully deductible, but a celebration meal doesn’t become one just because it happens at work.
For more detail on what counts as entertainment, see our guide to entertainment expenses.
Plan the cash as well as the tax
Christmas costs often arrive just as trading slows, staff take leave and holiday pay goes out. On 15 January, GST and provisional tax payments fall due as well. Before you commit to gifts, bonuses or a party, check that your cash flow can carry them through to February.
These earlier articles may help with your planning:
Check your plans before the rush
If you’re weighing up gifts, gift cards or bonuses for your team, or you’re not sure whether you need to file an FBT return, get in touch with our team. A quick conversation now can save you a tax surprise in the new year.
Last reviewed for accuracy 3 November 2026
Disclaimer: The information in this article is general in nature and does not constitute tax advice. Talk to us before making decisions based on this content.
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